Publication - Statistics

Scottish local government financial statistics 2017-2018

Published: 26 Feb 2019

Annual publication providing a comprehensive overview of financial activity of Scottish local authorities based on authorities audited accounts.

Scottish local government financial statistics 2017-2018
3. Local Government Reserves, Fixed Assets and Debt

3. Local Government Reserves, Fixed Assets and Debt

Local authorities can hold reserves to spend on services in the future and borrow to fund capital expenditure that will create an asset.

  • Total revenue reserves decreased by 0.9% from £1.95 billion on the 1st April 2017 to £1.93 billion on the 31st March 2018;
  • Total Local Authority debt increased by 4.3% from £16.83 billion at the 31st March 2017 to £17.55 billion at the 31st March 2018;
  • Value of assets increased by 2.0% from £42.12 billion at the 31st March 2017 to £42.97 billion at the 31st

Total Revenue Reserves: £1.93 billion

Total Debt, 31st March 2012 to 31st March 2018 (£thousands)

Value of Fixed Assets, 31st March 2013 - 31st March 2018 (£billions)

3.1 Local Authority Debt

Local authority capital expenditure is financed from a number of sources. When this is by borrowing money or a credit arrangement (e.g. finance lease, Public-Private Partnership (PPP) or Private Finance Initiative (PFI)) a debt liability is created to be repaid by the local authority from future revenues.

The Local Authority (Capital Finance and Accounting) (Scotland) Regulations 2016 require a local authority to maintain a Loans Fund. Advances are made from the Loans Fund to record the amount of expenditure a local authority has determined should be met from borrowing as permitted by legislation. The repayments made to the Loans Fund are the amount to be met in each financial year from a local authority revenue budget.

The expenditure recorded in the Loans Fund is expenditure which has been deferred (i.e. not met by taxpayers or housing tenants when it is incurred) and is to be charged to taxpayers or housing tenants over a number of future years. The value of a Loans Fund will increase whenever an advance is made for expenditure incurred, or loans made, in any financial year. The value of the Loans Fund will reduce when Loans Fund advances are repaid by making a charge to the General Fund or Housing Revenue Account. The balance on a Loans Fund at 31 March each year represents the amount of past expenditure a local authority has a liability to fund from its future revenue budgets.

A local authority will borrow externally to fund the expenditure that is deferred and recorded in the Loans Fund. The balance on the Loans Fund should be similar to the value of external borrowing. There may be differences between the two values. Local authorities may borrow internally, that is use cash reserves rather than borrowing externally, or may borrow in advance of incurring the actual expenditure to take advantage of favourable interest rates.

The value of Loans Fund advances outstanding is set out in Table 3.1 and the level of credit arrangements outstanding is set out in Table 3.2.

Following a review of the capital forms in 2015, the timing of the data collection was changed to allow for final, audited capital data to be collected. Prior to this, the data was collected after the financial year had ended, but before the audit of the accounts was complete.

The all-Scotland value of Loans Fund advances outstanding at 31st March 2018 was £14.45 billion (of which £10.88 billion was General Fund and £3.57 billion was HRA). General Fund Loans Fund advances outstanding increased by £296 million (2.8%) between 1st April 2017 and 31st March 2018. HRA Loans Fund advances outstanding rose by £120 million (3.5%) between 1st April 2017 and 31st March 2018.

At 31st March 2018, the Scottish average General Fund Loans Fund advances outstanding was equal to £2,006 per person (up 2.4% on 31st March 2017) and the average HRA Loans Fund advances outstanding was equal to £11,525 per HRA dwelling (up 4.2% on 31st March 2017).

Table 3.1 – General Fund and HRA Loans Fund Advances Outstanding, 2013-14 to 2017-18

£thousands

2013-14

2014-15

2015-16

2016-17

2017-18

General Fund

Loans Fund advances outstanding 1 April

9,650,825

9,932,872

9,954,276

10,067,865

10,582,876

ADD New advances from the Loans Fund

788,568

518,296

558,669

954,113

739,527

LESS : Repayments in year

469,823

462,945

456,449

434,452

428,901

LESS : Additional Voluntary Repayments in Year

34,546

27,437

8,889

3,584

13,461

Transfer of assets between funds (transfers out are negative)

-1,411

-1,773

-65

-3,552

-449

Total Loans Fund advances outstanding (£ thousands)

9,933,613

9,959,013

10,047,542

10,580,390

10,879,592

Per Head (£)

1,865

1,862

1,870

1,958

2,006

Housing Revenue Account

Loans Fund advances outstanding 1 April

2,835,741

3,024,509

3,219,673

3,360,105

3,454,161

ADD New advances from the Loans Fund

316,958

311,404

272,658

224,697

254,849

LESS : Repayments in year

127,585

105,602

112,504

116,884

123,707

LESS : Additional Voluntary Repayments in Year

9,956

12,411

16,931

20,987

11,287

Transfer of assets between funds (transfers out are negative)

1,411

1,773

65

3,552

449

Total Loans Fund advances outstanding (£ thousands)

3,016,569

3,219,673

3,362,961

3,450,483

3,574,465

Per HRA dwelling (£)

9,559

10,227

10,722

11,057

11,525

Total (GF + HRA) Loans Fund advances outstanding

12,950,182

13,178,687

13,410,504

14,041,714

14,454,057

Source: Capital Returns (CRFinal), Housing Statistics for Scotland, NRS Mid-Year Population Estimates

Credit arrangements such as Private Finance Initiatives (PFI) and Public Private Partnerships (PPP) including the Scottish Non Profit Distributing (NPD) model are not charged to the Loans Fund, but are a form of borrowing and included in the total debt figures.

Total credit arrangements outstanding stood at £3.10 billion on the 31st March 2018, an increase of 10.9% on the previous year. Credit arrangements per head within the General Fund increased by 10.5% to £571 per head, while within the Housing Revenue Account, credit arrangements per HRA dwelling fell by 5.1% to £8 per dwelling.

Table 3.2 – Credit Arrangements, 2013-14 to 2017-18

£thousands

2013-14

2014-15

2015-16

2016-17

2017-18

General Fund

Balance brought forward 1 April

2,845,843

2,800,193

2,750,910

2,675,714

2,792,467

ADD: New credit arrangements in year

30,625

42,701

21,726

207,018

396,216

LESS: Repayments of principal in year

90,802

92,895

87,933

90,265

92,470

Credit arrangements outstanding 31 March

2,785,666

2,749,999

2,684,703

2,792,467

3,096,213

Per Head (£)

523

514

500

517

571

Housing Revenue Account

Balance brought forward 1 April

7,132

4,965

3,469

2,679

2,543

ADD : New credit arrangements in year

0

0

0

0

0

LESS : Repayments of principal in year

2,167

1,496

790

136

145

Credit arrangements outstanding 31 March

4,965

3,469

2,679

2,543

2,398

Per HRA Dwelling (£)

16

11

9

8

8

Total ( GF + HRA ) Credit Arrangements Outstanding

2,790,631

2,753,468

2,687,382

2,795,010

3,098,611

Source: Capital Returns (CRFinal)

Total debt increased by 4.3% from £16.83 billion on the 31st March 2017 to £17.55 billion on the 31st March 2018. Of this, £13.98 billion was in the General Fund, which equates to £2,576 per head of population and £3.58 billion was in the Housing Revenue Account, which equates to £11,533 per HRA dwelling.

Table 3.3 – Total Debt, 31st March 2014 to 31st March 2018

£thousands

31st March 2014

31st March 2015

31st March 2016

31st March 2017

31st March 2018

General Fund

Loans Fund Advances Outstanding

9,933,613

9,959,013

10,047,542

10,580,390

10,879,592

Credit Arrangements

2,785,666

2,749,999

2,684,703

2,792,467

3,096,213

Total General Fund Debt

12,719,279

12,709,012

12,732,245

13,372,857

13,975,805

Per Head (£)

2,394

2,385

2,381

2,474

2,576

Housing Revenue Account

Loans Fund Advances Outstanding

3,016,569

3,219,673

3,362,961

3,450,483

3,574,465

Credit Arrangements

4,965

3,469

2,679

2,543

2,398

Total HRA Debt

3,021,534

3,223,142

3,365,640

3,453,026

3,576,863

Per HRA Dwelling (£)

9,568

10,186

10,598

11,065

11,533

Total Debt

15,740,813

15,932,155

16,097,885

16,825,883

17,552,668

Source: Capital Returns (CRFinal)

3.2 Prudential Indicators

The CIPFA Prudential Code sets out a framework for a local authority to demonstrate its capital investment plans are affordable, prudent and sustainable. A number of prudential indicators are set and monitored against three year capital expenditure plans.

Key prudential indicators are:

  • Capital Financing Requirement;
  • Total External Debt;
  • Operational Boundary;
  • Authorised Limit.

The Capital Financing Requirement (CFR) represents the amount of capital expenditure which a local authority has determined should be met from borrowing with the repayment of that borrowing to be met from future local authority budgets. Each year the CFR will increase by the amount of new capital expenditure which a local authority has determined should be met by borrowing (which includes both borrowing money and credit arrangements, which includes PPP/PFI) and decrease by the amounts repaid. The CFR only represents an authority’s underlying need to borrow to finance capital expenditure. The actual Total External Debt may be less than the CFR where a local authority has chosen to utilise internal cash reserves rather than borrow externally. The Total External Debt may exceed the CFR where a local authority has chosen to borrow in advance of actual capital expenditure. The Prudential Code limits borrowing in advance to the CFR plus up to 2 years planned capital expenditure to be funded from borrowing.

Capital Financing Requirement

Local authorities are also required to set limits on external debt.

The Operational Boundary is based on the authority’s capital spending plans and should reflect the most likely, i.e. prudent, but not worst case scenario for borrowing. In general, it is not significant if an authority breaches the operational boundary for a short period, however a sustained or regular trend above the operational boundary would be significant.

The authorised limit represents the maximum amount that the authority may borrow and is set at a level that reflects capital expenditure plans but includes headroom to allow for unusual cash movements i.e. treasury management.

Local authority Total External Debt increased by £0.47 billion (3.0%), from £15.94 billion at the 31 st March 2017 to £16.41 billion at the 31 st March 2018. Local authorities are currently under-borrowed, i.e. utilising internal cash reserves rather than external borrowing, with total external debt as a percentage of the Capital Financing Requirement of 93% at 31 st March 2018.

Table 3.4 - Prudential Information, 2013-14 to 2017-18

£thousands

2013-14

2014-15

2015-16

2016-17

2017-18

Capital Financing Requirement at 1 April

14,893,146

15,863,207

16,020,231

16,197,880

16,913,113

Capital Expenditure to be financed by borrowing or credit arrangements

1,136,151

872,402

853,053

1,385,828

1,390,592

Capital Expenditure to be financed by borrowing

829,701

829,701

831,327

1,178,810

994,376

Capital Expenditure to be financed by credit arrangements

30,625

42,701

21,726

207,018

396,216

Loans Fund principal repayments

597,408

568,548

568,953

558,595

552,608

Credit arrangements principal repayments

92,969

94,391

88,723

90,401

92,615

Additional voluntary contributions of principal repayments

44,502

39,848

25,865

26,359

24,748

Change in Capital Financing Requirement

401,272

169,615

169,512

710,473

720,621

Capital Financing Requirement at 31 March

15,294,418

16,032,822

16,189,743

16,908,353

17,633,734

Borrowing at 1 April

11,558,504

11,897,475

12,378,022

12,465,897

13,159,196

Other long term liabilities at 1 April

2,852,975

2,690,905

2,648,120

2,674,322

2,782,628

Total External Debt at 1 April

14,411,479

14,588,380

15,026,142

15,140,219

15,941,824

Borrowing at 31 March

11,816,384

12,332,169

12,465,804

13,159,196

13,332,573

Other long term liabilities at 31 March

2,790,631

2,645,977

2,680,311

2,782,628

3,079,982

Total External Debt at 31 March

14,607,015

14,978,146

15,146,115

15,941,824

16,412,555

Operational boundary for external debt at 31 March

16,684,872

16,779,418

16,982,303

17,519,099

18,415,584

Authorised limit for external debt at 31 March

17,749,541

17,787,296

17,733,442

19,083,076

20,064,032

Total External debt as a percentage of the Capital Financing Requirement at 31 March

96%

93%

94%

94%

93%

Source: Capital Returns (CRFinal)

Chart 3.1 – Prudential Indicators: 31st March 2013 to 31st March 2018

Chart 3.1 – Prudential Indicators: 31st March 2013 to 31st March 2018

Source: Capital Returns (CRFinal)

3.3 Fixed Assets

Capital Expenditure creates local authority assets. The value of local authority fixed assets is shown in Table 3.5 below. At 31st March 2018, local authorities held a total of £42.97 billion of assets, an increase of 2.0% (£848 million) on 31st March 2017.

Table 3.5 – Value of Fixed Assets, 31st March 2014 to 31st March 2018

£thousands

Value of fixed assets as at 31 March 2014

Value of fixed assets as at 31 March 2015

Value of fixed assets as at 31 March 2016

Value of fixed assets as at 31 March 2017

Value of fixed assets as at 31 March 2018

Operational Assets

Council dwellings

10,839,706

10,535,999

11,281,473

11,189,874

11,460,363

Other land and buildings

18,276,923

18,866,921

18,995,354

20,177,171

20,714,141

Vehicles, plant and machinery

1,003,162

1,178,814

1,197,642

1,145,829

1,063,300

Infrastructure assets

4,987,041

5,361,011

5,608,853

5,710,060

5,845,085

Community assets

161,728

169,971

184,156

177,537

183,634

Heritage assets

1,803,074

1,840,245

1,848,685

1,857,999

1,878,315

Total operational assets

37,071,634

37,952,961

39,116,163

40,258,470

41,144,838

Non-operational assets

Assets under construction

1,200,830

845,627

1,011,066

1,316,259

1,260,055

Surplus assets held for disposal

365,120

336,021

314,377

301,251

267,138

Investment properties

197,445

207,027

197,382

192,725

241,393

Total non-operational assets

1,763,395

1,388,675

1,522,825

1,810,235

1,768,586

Intangible Assets

23,913

52,306

48,437

51,435

55,078

Total Assets

38,858,942

39,393,942

40,687,425

42,120,140

42,968,502

Source: Capital Returns (CRFinal)